Grayscale Bitcoin Trust: The Second Largest Bitcoin Holder
Yesterday, Arkham released a report revealing that Grayscale Bitcoin Trust holds the second-largest amount of Bitcoin in the world. This trust currently holds over $16 billion worth of BTC, making it a significant player in the crypto market. While Grayscale publicly reports its balances, it has chosen not to disclose the on-chain addresses associated with the trust.
An in-depth investigation uncovered more than 1,750 public addresses connected to Grayscale, each containing less than 1,000 BTC. With this information, it is estimated that the trust owns a total of approximately 628,000 BTC. Additionally, Grayscale holds nearly $5 billion in Ethereum and various other cryptocurrencies such as LINK, MATIC, UNI, and BAT.
The Grayscale Bitcoin Trust: How It Works
Contrary to popular belief, the Grayscale Bitcoin Trust is not owned by the Grayscale company itself. Instead, it is owned by shareholders who have purchased shares in the trust. Shareholders have ownership rights over the trust but not the actual Bitcoins it holds. Grayscale, as the fund manager, handles the BTC holdings on behalf of the shareholders.
Grayscale acquired the BTCs that back the trust from the market. The physical custody of the 628,000 BTCs is entrusted to Coinbase Custody Trust Company. It is important to note that while the shareholders own the trust, the Grayscale Bitcoin Trust is the entity that technically owns the BTCs.
Grayscale’s official website confirms the fund’s assets under management at $16.1 billion, with over 620 million shares issued. Each share represents 0.00090050 BTC.
The NAV Discount and Potential Conversion to ETFs
GBTC shares are not redeemable, which means the only way to sell them is on the market. During bear markets, this can lead to a decrease in their market value compared to BTC. When the Grayscale Bitcoin Trust was launched in 2018, its NAV was significantly higher than the market value of the underlying asset. However, with the rise of Bitcoin’s price, the AUM surpassed the NAV.
Currently, the NAV is still 19% below the AUM. The potential conversion of the Grayscale Bitcoin Trust into ETFs could help reduce this difference. Shareholders would be able to redeem their shares for an equivalent value in BTC, eliminating the gap between NAV and AUM. Grayscale has applied for SEC approval to convert the trust into an ETF, and the recent discovery that all 628,000 BTC are on-chain bodes well for shareholders.
Hot Take: The Future of Grayscale Bitcoin Trust
As we await the SEC’s decision on Grayscale’s ETF conversion application, the possibility of redeeming GBTC shares for BTC seems promising. While nothing is certain yet, the disclosure of on-chain BTC holdings adds to the likelihood of approval. If the conversion goes through, it could provide a more seamless and direct way for investors to participate in Bitcoin’s growth without the need to buy BTC directly.
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